The Middle East and North Africa’s oil exporting countries will see economic growth accelerate in 2012 to 6.6 percent, mainly due to a strong rebound of activity in Libya, the International Monetary Fund said on Tuesday.
The forecast marked a rare upgrade in the IMF’s semi-annual World Economic outlook report after it downgraded its expectations for global growth.
The IMF had forecast growth of 4.8 percent across the oil producing economies of the Middle East and Africa in its previous semi-annual review in April. Growth in 2011 was 3.9 percent.
However, it forecast that 2012 GDP in Iran, suffering from international sanctions over its disputed nuclear programme, would fall 0.9 percent to product the country’s first economic contraction since 1994. In April, it had forecast growth of 0.4 percent.
“In most … oil exporters, non-oil GDP growth is expected to remain robust in 2012, supported by ratcheted-up government spending as oil prices remain at historically high levels, while oil-sector growth is forecast to moderate somewhat after a strong increase in 2011,” the IMF said.
It attributed the pick up in its expectations for the oil exporting grouping largely to increased economic activity in Libya since 2011.
The Fund included Sudan among oil importers in its latest review following the secession of South Sudan in 2011. It had listed Sudan among the oil exporters in its April report.
Near-term risks mainly stem from oil prices and global growth, the Fund said: “For oil exporters, government expenditures have risen to such a degree that substantial declines in the price of oil could undermine fiscal positions.”
“Despite significant accrued financial buffers, such declines could put at risk ongoing infrastructure investment and growth,” it said.
However, geopolitical risks, including those related to Iran, could lead to higher oil prices, the IMF said.
“In oil exporters, it will be critical to contain increases in spending on entitlements that are hard to reverse,” the Fund said, adding that a priority should be to take advantage of high oil prices to diversify economies away from hydrocarbons.
Crude prices have been on a roller-coaster ride this year, sliding to lows of around $88 per barrel in June from a March peak above $128. They were around $110 this week.
OIL IMPORTERS WEAK
In contrast, the IMF cut its 2012 forecast for growth among the region’s oil importers to 1.2 percent from 2.2 percent in April as countries from Morocco to Jordan suffer from social unrest, economic weakness in Europe and high oil prices.
The group’s GDP rose 1.4 percent in inflation-adjusted terms in 2011, the IMF said. Syria is excluded due to the civil war.
The IMF raised its forecast for 2012 growth in Egypt, weakened by economic turmoil since the popular uprising last year, to 2.0 percent from 1.5 percent predicted in April.
However, this year’s growth prospects for Morocco, hit by drought and the slump in the European Union, worsened. The IMF now sees 2012 growth of 2.9 percent, compared with an April forecast of 3.7 percent.
“Because of extensive food and fuel subsidies in most economies, the immediate concern with spikes in commodity prices is not the effect on inflation and disposable income, but rather the strain on budgets and foreign exchange reserves,” the IMF said, referring to oil importers.
“Structural fiscal reforms aimed at reorienting government spending toward poverty reduction and the promotion of productive investment will be crucial to improving the budget outlook,” the Fund said.
Reuters
